The Economy: Consumers are feeling confident as we enter the Holiday shopping period. Cheap gasoline has fattened wallets for the annual onslaught of present buying. The confidence and sentiment numbers match what we are hearing from people we talk with. Across the spectrum we’re hearing, “Things seem to be getting better.” This outlook from the street was reflected in the Fed’s minutes that were released today. The U.S. economy is now clearly the engine of growth for the planet. The minutes acknowledged that the global slowdown seen in Europe and Asia has limited effect on the U.S. Inflation is not an issue and there is little wage pressure. In fact, deflation remains a concern. The U.S. economy continues to expand at a moderate pace. The elephant in the room continues to be when the Fed will begin to raise interest rates. In the early days of this century, Yellen’s predecessor, Alan Greenspan, discovered the limits of manipulating interest rates to achieve monetary policy objectives. The Yellen Fed is acutely aware of being on the edge of losing credibility as they face this same dilemma. Clearly interest rates will eventually go up … simply because they can’t get much lower. So it’s a matter of when; not if. However, as we look at the U.S. economy within a larger global context, we don’t see a compelling reason for an increase any time soon. Plan accordingly.

Food for Thought: A joke making the rounds is that in the future, Europeans are going to be predominantly used as housemaids for the Chinese. This always gets a laugh. It speaks to the widespread belief that we’re moving to a China-centric world. But this assumes that China is a monolithic juggernaut. History tells us otherwise. Remember Japan in the 1980’s. They had the biggest banks, the best cars, electronics, consumer products, the best labor practices, the best business models. They were buying up U.S. real estate at a prodigious rate. At the peak they bought Pebble Beach and the Rockefeller Center; paying massive premiums because they were invincible. Then it imploded. History may be repeating itself.

The Economy: Banks and bonds were closed for Veterans Day so the economic calendar has been light this week. Two items of good cheer: First, with the fall in the price of oil, this holiday shopping season could be the best in years. The boost in holiday sales should raise 4th quarter GDP. Second, the U.S. and China have reached a historic deal to end tariffs on high-tech products. It’s estimated that this deal could affect $1 trillion in goods. Approval by the World Trade Organization is expected. The last time this type of technology deal went through was in 1996. At that time, most GPS technology, much of our medical high-tech and smart phone tech didn’t exist. Happy Holidays indeed!

Food for Thought: … you got your problems and I got mine … Warren Buffet lost $2 billion in one day last month. Jack Ma, the owner and newly minted billionaire of Alibaba is complaining that he is tired, and doesn’t like being rich. Larry Ellison, Oracle Big Dog, Winner of the America’s Cup and California’s wealthiest man at $28 billion asks, “Bermuda or San Diego?” Larry has San Diego in his sights for the location of America’s Cup 2017. The other contender is Bermuda. Huh?!? … think I’ll swim there. The decision is expected any day. The San Diego Yacht Club hosted the Cup three times: 1988, 1992 and 1995. The 35th America’s Cup would be held in San Diego Bay instead of several miles off Point Loma as was the case in the past. This is part of the continuing effort to make competitive sailing a spectator sport. The potential television rights have all comers salivating. Perhaps it’ll happen. If you’re a sailor watching sailboat races can be exciting. If not, it can be like watching paint dry.

The Economy: Oil and the elections dominated this week. Oil’s persistent decline is a boon for consumers and a curse for producers. Saudi Arabia has responded by cutting prices in an attempt to gain market share. ISIS must be giving the stuff away. Falling oil prices will stimulate the global economy. The U.S. as the largest consumer will see disposable income rise dramatically as folks spend less on gas and heating oil. Airlines and other fuel-intensive industries will benefit from the windfall of lower operating costs. Against this backdrop, employment ticked up while mortgage applications ticked down. Mid-term elections saw Republicans retake the Senate. They now control both houses of Congress. Stand by for gridlock to become a log jam. Now we have a lame duck President facing a Republican majority that is fractured by internal strife between the Old Guard and the Tea Party. Who’s on first?

Food for Thought: Talking heads are calling this a breakthrough election with the largest Republican majority since before the Great Depression. Perhaps political neophytes or fanatics share this view. For the rest of us, the Fools on The Hill, regardless of stripe, have to produce results. Our great country is all too often led by self-serving lemmings with no regard for the damage they inflict on those that put them in office. Lead, Follow or Get Out of The Way!

The Economy: Europe, China, the Dollar and Oil were headliners this week. The economies in Europe and China continue to show signs of slowing. This week Fed officials said a worldwide economic slowdown may delay interest rate increases. The dollar has rallied with the global slowdown. Though this makes U.S. exports more expensive, 70% of the U.S. economy is consumer/service driven. So the effects on our economy will be limited. It’s another sign that the U.S. economy is the global engine of growth. Oil has fallen to 2-year lows with no bottom in sight. At this point in time, the Saudis have shown no interest in trying to support oil prices. The action in oil prices has the effect of a massive tax cut on American consumers and will further benefit the U.S. economy. Bond-Land was ecstatic over the news with interest rates falling to 2-year lows.

Food for Thought: Stocks plunged this morning. At the lows the DOW was down 460 points. Though the indices came back late in the day, the DOW has turned negative for the year. The S&P and NASDAQ are barely in positive territory. We’re in the midst of earnings reporting season. Disappointments are being met with crushing selloffs. Netflix disappointed and was down $114/share in after hours. We’re beginning to see bargains in anticipation of a move higher into the 4th quarter. But first we have to get through this valley of the shadows. Click here for a market perspective. Now may be the time to talk to your CPA about tax loss selling.

The Economy: The Fed’s  Minutes were released today at 11AM PST. They caused more than the usual rock ‘n roll, roller-coaster effect on the markets. Bond-yields went down dramatically and stocks rocketed out of sight … up nearly 2%. The Bernanke Fed worked hard to establish transparency in their decision-making process. You reap what you sow. The Yellen Fed is now grappling with how to maintain transparency without spooking markets over word changes that would indicate a coming interest rate hike. The point to be taken from the Fed minutes is that interest rates are data dependent more than ever. No action or date is set in stone. The minutes showed that the Fed has an upbeat economic outlook. However risks exist in a weak global economy. Long story short, the Fed may in fact raise interest rates next year but the timing of that action is less transparent than ever.

Food for Thought: Yippee ki-yay! Stocks and bonds strapped on the rocket-pack and continued their bipolar love affair with the Fed. Central Bankers are the new Masters of the Universe. Tuesday there was nothing good in life. Today everything is beautiful. Yesterday’s damage to the stock market was reversed today after the Fed showed their cards. Whether this is a true reversal or a head fake is uncertain. Stocks have been in a down trend since mid-September. Today some of that carnage was mitigated. Stocks usually find a bottom sometime in October. After yesterday and today’s moves, we may be forming that bottom.

The Economy: … into every life some rain must fall … Economic news this week was negative. US pending home sales fell. US home price appreciation fell. The Chicago Purchasing Managers Index (PMI) declined. US Consumer Confidence fell. The EU continues to show weakness with the ECB scheduled to announce its version of Quantitative Easing (QE). In the geopolitical space, Hong Kong is rioting. Increased sanctions against Russia are being considered. Ebola has come to the US. Global stock markets are in retreat. Sorry folks, but the sky is not falling. Andy Warhol’s 15-minutes has merely been compressed into a 15-second negative sound bite by the talking heads. … truth is that real estate has been on a rocket ride of years. So it slows a bit. And, Consumer Confidence works like this: … You enjoyed yourself too much at Grandma’s birthday party last night. You stagger out of your vacation home, with a massive headache and get into the Lambo for the ride to Blue Bottle Coffee. You’re bent that George didn’t invite you to the Venice wedding. At Blue Bottle, the Consumer Confidence guy asks how the future looks. … you tell him, “It’s awful.”

Food for Thought: You gotta be an optimist… that’s the only reason to get out of bed in the morning. So, as we’re inundated with news of the Ebola Mushroom Cloud, I have to step back and think about the past. There was another plague that came out of Africa. Doctors turned away patients. Friends and family shunned each other. It was called AIDS and it was going to end civilization. Years later came SARS. Same prognosis: a global funeral pyre. Today it’s Ebola. Hannibal at The Gates! Yes a tragedy …but not the apocalypse. … however … today’s stock market action may be the true tipping point. Enjoy the Lambo.

The Economy: The global recovery appears to be both weaker, and more driven by the U.S. While central bankers and government officials continue to work on policies dealing with deflation in Europe, slackening demand in China and emerging markets, the U.S. economy looks to be powering ahead. The release of U.S. new home sales is a case in point. The number showed an impressive 18% gain in August. In an otherwise light week, this Thursday will see the release of several additional economic indicators. Federal Reserve Board members were also active this week with Charles Evans, a noted dove, commenting that the Fed should be “exceptionally patient” in raising interest rates. He pointed out that in 1937, a premature hike in interest rates crushed the expanding depression-era economy. He cautioned against a replay of that mistake. The Yellen Fed appears determined not to make that error again. The whipsaw interest rate environment of the Greenspan Fed may be a thing of the past.

Food for Thought: The 18% gain in the August New Home Sales coupled with Evan’s comments fueled a strong rally in stocks. After a September marked by weakness or sideways action, the stock market took off. Though we’re in what is traditionally the weak part of the year, stocks are again near their highs. We expect a dip before October is out. Then we should see a rally into year-end. However, we continue to take profits. Pigs get fat, hogs get slaughtered.

The Economy: FOMC is in the spotlight this week.  Their 2-day meeting wrapped today with the planned reduction in QE that will see the program ended on schedule. Forward guidance was unchanged from the June meeting. Overall, steady as she goes in light of weak labor markets and low inflation. In short, the much ballyhooed Fed meeting was a non-event. In the past week US Industrial Production (IP) unexpectedly declined in August (-0.1% vs. +0.2% in July).  Auto manufacturing cooled, causing the 1st drop in 7 months. Stocks rose on the unexpected drop in consumer prices. Consumer prices, as measured by the Consumer Price Index (CPI), fell in August, below consensus estimates for a flat reading.  The weakness in the CPI was broad-based. However, The Empire State Manufacturing Index rose to 27.5 in September vs. consensus (16.0). Stocks again rallied in expectations that the Fed will keep interest rates low to infinity and beyond. This is the ongoing mixed picture of the U.S. economy. Some good data and some poor data.

Food for Thought: The San Diego economy continues to flourish with tourism, high-tech/med-tech and defense. Exports hit a record $17.9 billion in 2013 according to the San Diego Business Journal. Kayak touring has hit its stride with more than 150,000 people going out in La Jolla alone. The tourist trade is benefiting from one of the nicest summers on record. Our banks in Minneapolis say the weather is already in the 50’s there. I could do with less humidity but with the ocean so warm, a quick dip is just around the corner. Tourists are astonished at how beautiful San Diego is. Sun, sand, surf and no bugs! Barbeque in the evening with all the doors and windows open. Amazing. Paradise.

The Economy: Last week the European Central Bank (ECB) lowered interest rates by 10 basis points to a new historic low. Bank deposit rates are now negative 20 basis points. This means that depositors pay the bank. The ECB also embarked on Quantitative easing (QE). QE is the unconventional monetary policy used by The Bernank to stimulate the U.S. economy when standard monetary policy became ineffective during the 2008 financial crisis. Now Mario “I’ll-do-whatever-it-takes” Draghi, head of the European Central Bank (ECB), is following suit. Since the efficacy of QE is questionable, the ECB’s actions speak of “Throw it on the wall and see what sticks” policy. Whether brilliance or bumbling, both these ECB measures are indications of a contracting European economy. ECB and Fed policies are now clearly diverging. The Fed is ending QE, with questionable if any results, while the ECB is beginning the QE Hail Mary Pass. The U.S. continues to emerge as the engine of global growth.

Food for Thought: A shout out thanks to friend and More Money reader John Lennon for recommending the book “”The Wise Men: Six Friends and the World They Made” by Walter Isaacson. The book covers the 6-decades from 1915 to 1975, when the U.S. morphed from an isolationist country whose military might was ranked 18th in the world, to the preeminent super power. The astonishing industrial production of the United States was the basis for this unprecedented transformation. That industrial production was the result of American ingenuity and the productivity of American labor. Read the book. The American Century is far from over. We’ll have a pull-back in this stock market. Eventually we’ll have another bear market. But prudent wealth management means being invested in financial assets.